By Alan Swahn
Contracts in general have many stakeholders across multiple departments. Getting upfront reviews and approvals isn’t trivial. Once a contract is executed and in the file cabinet or document management system, tracking time-sensitive terms and compliance to terms is even more challenging. Contract management products and standard processes can help resolve many of the problems associated with a contract lifecycle, if the flashpoints that cause delays within the system are designed out.
One to watch is the workflow management component that can be a go or no go, for efficient contract management. Workflow management is the process enforcer that facilitates transparency, making deadlines, and compliance (contract, regulatory, tax…). Workflow should be tightly coupled to the lifecycle of a contract for:
A number of key workflows have an associated people matrix. For an approval workflow it may be the approvers and their roles associated with contract amount signoff, contract type, and originating location. If changes are performed manually to approvers' roles or the approvers themselves, this may be a flashpoint waiting to happen. Updates become reactive to process delays or break down. An example would be a workflow process that is waiting on approvers that are never going to answer the bell. Perhaps because they are on vacation, traveling, on sabbatical, have left the company, or are just off the grid. It doesn’t mean the workflow process will fail. Workflow systems can handle aging, escalation, warnings, failover, cancellation, and updates for workflows in process. In this example the workflow should trigger an escalation phase and backup approver as required. But escalation delays make the process less efficient.
On the flip side, if the workflow system is connected to a dynamic source, a change in personnel could be accounted for and the workflow automatically corrected. The dynamic source doesn’t need to be complex, just accurate and kept up-to-date. In the foregoing example, a company directory that includes name, email address, title, department, and location is sufficient. Of course there should be an accompanying database source that associates a person’s title, department, and location to approval scope—department, business unit, subsidiary, company wide; type of contracts; and dollar amount. The approval scope database changes very infrequently, once setup. On the other hand, a source like the company directory can change almost every day in a large global organization with employees taking on new roles within a company, new hires, and people leaving. The workflow management system should “see” the changes in the company directory, and update its matrix of approver logic, based on their scope. It should then update any workflows in progress to account for the approver change. This potential flashpoint is then removed by a combination of robust workflow and a dynamic data source.
Another flashpoint is the inability to kickoff a workflow, or at least an alert, based on a contract term. Once a contract is signed off and in the firebox, the real work begins. With 1000s or 10000s of contracts, how do you know if the terms are being followed, tiered discounts are being taken, there is compliance to escrow deposits, time sensitive options are executed, or termination provisions proactively selected? An auditable closed loop process is really required. Key terms in a contract should be easily associated with a workflow, before the contract is put in the box. The associated workflow can then be the compliance watchdog to ensure the maximum benefit is achieved from each contract. This flashpoint is therefore addressed by picking a solution that doesn’t view contract management as document management alone, but rather understands the contact management lifecycle and supports the creation of closed loop auditable processes.